CHICAGO – Companies may be exposing themselves to unnecessary risk and additional costs on big construction projects by failing to have adequate technology and project controls in place to handle the job, according to polls taken during a three-part webinar series on the topic hosted by Baker Tilly in the last quarter of 2013.
Forty percent of poll respondents—internal audit professionals from companies in a variety of industries across the country—indicated that their organization has experienced construction fraud. Fortunately, most contractors are honest hardworking professionals; however, the frequency of fraud occurrences demand internal audit professionals integrate construction risk management programs into their audit plans.
In addition, ineffective project controls are magnified on a mega project. Project control weaknesses that may be insignificant on a typical construction project can have a multimillion-dollar impact on a mega project. This observation was confirmed by more than 70 percent of poll respondents who agreed that once systemic problems exceed $1 million, materiality is no longer a significant consideration.
“Mega construction projects are particularly susceptible to being behind schedule, over budget and at risk for fraud if not managed effectively,” commented Tony Ollmann, webinar presenter and director in Baker Tilly’s construction risk management practice. “Having robust technology and construction project management methodology in place helps the internal audit function -- and independent parties -- efficiently mitigate these risks by providing increased visibility and early detection, thus reducing project costs and driving project success.
To stay on track, mega projects require professionals who are exceptional at handling project management, estimating and scheduling. They often use new technologies and construction methods that can stress standard project controls to the breaking point. These project conditions demand risk mitigation programs, thorough data analysis and anti-fraud programs through all phases of construction to proactively identify and address risks and resolve issues.
For an in-depth look at these and other critical construction risk topics, a replay of the three-part webinar series, “Auditing mega projects,” is available >
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Baker Tilly Virchow Krause, LLP (Baker Tilly) is a leading advisory, tax and assurance firm whose specialized professionals guide clients through an ever-changing business world, helping them win now and anticipate tomorrow. Headquartered in Chicago, Baker Tilly, and its affiliated entities, have operations in North America, South America, Europe, Asia and Australia. Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 147 territories, with 33,600 professionals. The combined worldwide revenue of independent member firms is $3.4 billion. Visit bakertilly.com or join the conversation on LinkedIn, Facebook and Twitter.